Quote:
Originally Posted by Jene » Money management teaches us how to avoid the costly mistakes done by various new traders. Often they lose the entire amount of investment on the first hand of trade. Psychology is the most important factor to money management in forex no emotional attachment with the money how so ever. This is not very easy but it works successfully. Don’t allow yourself to get emotional on trade which can be an obstacle to trade properly. |
Ok I agree most of the talk surrounding trading Psychology is dealing with money management related themes - letting winners run, cutting losses, riding out equity swings without messing with your system, picking the right markets and risk tolerance etc - but it's not the most important factor. Having the correct risk strategy will in itself manage many of those psychological issues, as you have defined your risk:reward expectations in advance.
A hybrid (at stop) equity model can give us an accurate forecast of where our account stands at all time across longer and mid term systems, although some instruments are more hit and miss than others (CFD's we can be dead on thanks to GSLO's, Options are a little harder to pin down). With this factor known we are aware of what our drawdowns will be should some tool suddenly suggest interest rates need to go up in the US, or that a major banks share price is not worth the paper its written on.
Managing losing streaks on a shorter term (intraday) system is a more complex argument, but using appropriate % risk models until the system has proven it's profitability over a variety of market conditions tends to the job better than belting away at 5% risk and being told to "stick at it as it's a long term game" as many of the so called experts running trading rooms tout these days, or my favorite recently - we can have you up and running writing options on a live account within a week.
It could be argued that having declared yourself a trading god during a bull market and loading up your risk only to run in to a congestion phase as we did on the FX markets recently is simply a show of inexperience as a trader, the psychology only comes into it when they have to pick themselves up off the floor, work out what went wrong, learn from those lessons, and get back in the fight. Hopefully a structured risk plan has left enough of their account intact to do this.
07-02-2008, 04:40 PM
Re: Webinar on Money Management 
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